GEHU GHOTALAGEHU GHOTALA

• Rs.3,000 crore “Wheat Import Scam” by the “Agriculture, Food, Public Distribution, Consumer Affairs Ministry – Govt. of India

• Importing inferior quality wheat at Rs.15.97 when the best quality sold in retail at Rs.10 in India.

--Dr. Kirit Somaiya

A tale of ‘Wheat Scam’A tale of ‘Wheat Scam’

• Story of converting Wheat Exporting India into a Importing Country.

• 140 days buffer stock in 2003-04.

• India Exported 124 lacs MT in 2001-04 (BJP-NDA Govt.)

• Started Import from 2004-05 (Congress-UPA Govt.)

Agriculture Commission Agriculture Commission observes…observes…

• The Commission for Agricultural Cost and Prices of Government of India (CACP), Report on Price Policy of 2006-07,

– “in view of the rapid depletion of stock, the Government had decided to import wheat. This was a sea-change from the situation during 2001-02 to 2004-05, when the country exported 12.4 million tons of wheat.”

Plan of MNC-Corporates…Plan of MNC-Corporates…

• Systematic plan of MNCs, big Corporates

• Pressure from Association of Wheat Exporting Countries of USA and Australia.

• Master strategy plan

• Knowingly/unknowingly the Government, politicians, system are allowing exploitation.

Congress-UPA Govt.Congress-UPA Govt.failure-manipulation?failure-manipulation?

• Disposing of buffer stock aggressively

• Making FCI non-functional

• Selling buffer stock in the open market

• Faulty procurement

• Procurement has come down from 16.80 million tons in 2003-04 to 9.22 million toones in 2005-06

Congress-UPA Govt.Congress-UPA Govt.failure-manipulation?...failure-manipulation?...

• Wheat production jumped from 69 million ton in 2005-06 to 74.82 million ton in 2007.

• Govt. procurement down to 50% of procurement of 2003-04.

• Delay in announcement of Minimum Supporting Price (MAP).

• Announcement of bonus delayed knowingly.

• Farmers forced to sell to Corporates/MNCs.

Congress-UPA Govt.Congress-UPA Govt.failure-manipulation?...failure-manipulation?...

• In 2006, production 69 million ton. Govt. imported 5 million ton.

• In 2007, production rose to 75 million ton. Govt. importing 5 million ton again.

• Govt. relaxed norms (quality) to accommodate import.

• Inferior quality – not saleable in Open Market.

UPA Govt. Import – (Scam) Game UPA Govt. Import – (Scam) Game PlanPlan

• Immediately after installation of UPA Govt. in May 2004, planned strategy of converting India into a wheat importing country.

• Import policy and action got started in 2005.

• In 2 years, Rs.10,000 crores spent on import of wheat double rate paid to MNCs than Indian farmers.

Expert Says… MNC’s Expert Says… MNC’s ScamScam

• In his article in May 2007, Mr. Bhaskar Goswami wrote, • “Alarm bells began ringing in early March when, despite

predictions of a bumper wheat harvest in India, US Wheat Associates -- a trade body funded by the federal government and US wheat producers -- stated that India would import up to 30 lakh tonnes of wheat this year. Not only has the government followed this diktat, it has revised the estimate by an additional 20 lakh tonnes as a small 'favour' to multinational grain corporations.”

Indian Kisans Vs Foreign Indian Kisans Vs Foreign FarmersFarmers

• In 2006, Govt. Paid Indian farmers Rs.6.50/kg and imported wheat at Rs.10/kg.

• Bharatiya Kisan is paid Rs.7.50 per kg for wheat in 2007.

• In 2007, Govt. pays Rs.15.97 per kg to “Videshi Kisan”.

• The consumer in Mumbai paying Rs.10 to Rs.12/kg for better quality.

• State Trading Corporation paid Rs.13.61 per kg in July 2007.

• STC paying Rs.15.97/kg in Aug. 2007

• This is the philosophy of the Congress-led UPA Government.

““Andher Nagari Chaupat Andher Nagari Chaupat Raja”Raja”

• This is a global Government.

• The Prime Minister talks about global economy.

• The Commerce Minister talks about global trade.

• Snatching away – Compulsory land acquisition for Global Investors (SEZ)

• Agriculture & Consumer Affairs Minister busy in becoming global President of the Cricket Control Board.

Accommodating MNCsAccommodating MNCs

• Is it to accommodate big people?

• To allow big Corporates to play at Chicago Commodity Exchange?

• To allow big Corporates to hedge & Earn Rs.125 crores wheat future in auctions?

• To have the benefits through hawala transactions?

Creation of Wheat CrisisCreation of Wheat CrisisProcurement Reduced Every Procurement Reduced Every

YearYear

• Wheat procurement is carried out in the marketing year following the crop year, that is, procurement of the 2002-03 crop is carried out in 2003-04.

Economic Survey Economic Survey CondemnsCondemns

• Wheat procurement was started in April 2006 at Rs 650.

• After abysmally poor response given the low procurement price, the Government declared a bonus of Rs 50, bringing the total to Rs 700.

• However, by that time many peasants, especially those without holding power, had sold their crop, much of it to private traders.

• Source: Economic Survey 2005-06 and Commission for Agricultural Costs and Prices (CACP)

Production And Demand Of Production And Demand Of WheatWheat

• 4th Advance Estimates of production of foodgrains, oilseeds and other

• commercial crops for 2006- 07 released on 19.7.2007• Source: Dept. of Agriculture & Cooperation, Directorate of Economics & Statistics

Fall In Procurement Fall In Procurement RAJYA SABHA RAJYA SABHA

QUESTION NO 1227 ON 09.03.2007QUESTION NO 1227 ON 09.03.2007

• There has been no import of foodgrains for the Central Pool by the Department of Food and Public Distribution during 2004-05 and 2005-06. However, since the procurement of wheat in Rabi Marketing Season (RMS) 2006-07 was only 92.3 lakh tonnes as against 147.9 lakh tonnes procured in the previous year, to make up the shortfall in RMS 2006-07, the Government took decisions to import 55 lakh tonnes of wheat in 2006-07 to meet the requirements of the Targeted Public Distribution System and other welfare schemes.

Procurement Of FoodgrainsProcurement Of Foodgrains

• Procurement of Wheat gone down to facilitate Import ?

Import Scam of June 2007Import Scam of June 2007

• Cancellation of Tender of Less Price

• Import scam of June 2007 ‘Daylight Robbery’.

• Govt. finalized rate of $ 263 per MT.

• The Ministry orders STC to scrap the tender.

• The Consumer Ministry asked for fresh tender

• Tender opened on 26th June 2007

• Govt. paid $ 325 per ton.

• Rs.125 crores paid more

Govt. Logic for Import…Govt. Logic for Import…

• May 2007 Tender was Scraped

• Reason given possibilities for softening of prices for arrival beyond August, 2007 as compared to June August prices received in the tender.

• Govt. adds,

– “it was not advisable to import wheat at the rates recommended by the STC as It was feared that acceptance of imported wheat at prices higher than the procurement price in the domestic market would induce discontentment amongst domestic farmers.

Govt. Logic for Import…Govt. Logic for Import…• Govt. Cancel Order @ $267 i.e. Rs.1063 – First Week

June 2007

• Govt. re-orders @ $ 325 i.e. Rs.1317 – 26 June 07

• Immediately after scrapping the tender, Ministry asked STC to invite fresh tenders.

• The whole process of re-tendering completed in a gap of few days

• New tender finalized 5.11 lakh tons at rate of $325/MT.

Information Acquired under Information Acquired under RTIRTI

• Given below information from the reply :

• First time tenders were invited by end May 2007.

• STC on behalf of Food Ministry finalized import at the rate of $ 263/MT.

• Reason for such import has been stated as “to create buffer stock”

• Food Ministry asked STC to scrap the order in early June 2007.

• Reason given for cancellation,– “the rate of Rs.10.63/kg higher than the procurement price

of 7.50/kg. This will create discontentment among domestic farmers.”

Information Acquired under Information Acquired under RTI…RTI…

• Another reason noted on file ‘News Agency’ stating that “prices of wheat will come down”

• On questioning, for Re-ordering explanation given by the Ministry (RTI reply) is that the Government decided to develop buffer stock.

State Trading Corporation Tender State Trading Corporation Tender DetailsDetails

• In just 3 week of June 2007 Govt. cancelled the order of 263 $/MT, issued fresh tender on 26 June booked order for 5 lac MT @ 325 $/MT

The State Trading Corporation had called for Tender for import of Wheat in the year 2007 - 08

Tender To Import Wheat - Tender To Import Wheat - 20072007

• The State Trading Corporation of India Ltd., DATED 05.05.2007

• TENDER NO: STC/WHEAT/IMP/01/2007-2008 DATED 30.04.2007 FOR IMPORT OF 1,000,000 MTS +/- 5% WHEAT

• THE DUE DATE FOR SUBMISSION OF OFFER IS “ 1500 HRS IST ON 21.05.2007” I/O EXISTING

• THE TENDER SHALL BE OPENED AT “ 1530 HRS IST ON 21.05.2007” I/O EXISTING.

• THE OFFER MUST BE VALID FOR ACCEPTANCE BY STC “TILL 2300 HRS IST ON 30.05.2007” I/O EXISTING. ALL OTHER TERMS AND CONDITIONS OF THE ABOVE MENTIONED

(S.SARKAR)

CHIEF GENERAL MANAGER

Hedging by MNCs at CBOTHedging by MNCs at CBOT

• Various theories about scrapping the tender of $ 263 and reordering at $ 325 floated in Commodity market

• Government cancelled the order to accommodate 2 big Corporates/MNCs

• Wheat prices at Chicago Board of Trade (CBOT) was $ 505 per Bushel (Bushel is the kind of term used to determine weight or quantity in U.S., E.g. In India, we have sher, pav sher, etc. Wheat CBOT control size 5000 bushel = 136.1 MT.

• ## So the price that is quoted is in $ for the 136.1 MT) ##

Scam through Chicago Commodity Scam through Chicago Commodity ExchangeExchange

• During 27/5 to 5/6/2007, prices were $ 510 per Bushel at CBOT

• After scrapping, story was floated about import of 50 lac tons.

• Government intimated STC to restart the import tender process

• Prices jumped to $625 /Bushel in next few days

• Govt. booked import order at most higher rate.• Following tables and charts of the wheat price

movement of 28/4/2007 to 21/7/2007.

Chicago Commodity Exchange

Chicago Commodity Exchange- Rates – Sept. 2007

Chicago Commodity ExchangeRates – Sept. 2007

Converting India Into Converting India Into “Wheat Importing Country”“Wheat Importing Country”

• Systematically steps taken since 2005

• Govt. gave special permission to MNCs and Big Corporates to directly procure wheat from Mandi.

• Put farmers at their mercy by delaying MSP and bonus

• Compelled the farmers to dispose of the stocks to MNCs/Corporates at cheaper rate.

• This is being done in spite of very low off take under TPDS. Against the allocation of 146 lac tons in 2006-07, offtake was only 103 lac tons.

Procurement, Offtake And Stocks Procurement, Offtake And Stocks (Central Pool)(Central Pool)

It is Scam – ‘Milibhagat’It is Scam – ‘Milibhagat’

• 3/1/06 Sharad Pawar declared, “no need to import.”

• March 06 Govt. continued to make open market sale

• 2/2/2006, with no unusual offtake.

• In less than two months before procurement, Shri Pawar announced imports.

• It is ‘Modus Operandi ? prepare background for import and facilitate MNC/Corporates to ‘Hedge’ wheat purchases at International Market.

Foreign firms long in the Foreign firms long in the knowknow

• The fact is, soon after the deliberately low procurement of April-May 2005, US and Australian multinationals began “predicting” that India would import substantial amounts. The US Department of Agriculture stated in July 2005 that India was expected to import one million tonnes of wheat. By November 2005, leading US analysts predicted that India would import two million tonnes.

• Source : Report of RUPE

Open Market Sale And ImportOpen Market Sale And ImportLok SabhaLok Sabha

Unstarred Question No 74 On 26.02.2007 Unstarred Question No 74 On 26.02.2007

• Government have recently taken a decision to release 4 lakh MT of wheat under Open Market Sale Scheme (OMSS). Orders for release of a total quantity of 3.65 lakh MT of wheat to the various States under OMSS across the country in the month of February and March 2007 have been issued on 15.2.2007 and 20.2.2007. The wheat is being made available to the States at a price of Rs.986.06 per quintal. The remaining 35,000MT of wheat would also be released to States based on their demand/lifting.

• Sale of Wheat in Open Market @ Rs.9.86/k.g. The same was procured @ Rs.6.50/k.g. from farmers

Import Of Essential Import Of Essential CommoditiesCommodities

• Govt. informs Loksabha on 19.03.2007

• Government has decided to import, if necessary, upto 3 million tons of wheat through the STC for Public

• Distribution System and other welfare schemes like Mid Day Meals and ICDS.

• On 19.03.2007 if needed 3 million ton wheat may be imported.

Tender Called For Various Tender Called For Various Phases Qty And PricePhases Qty And Price

Source: Consumer Food – Public Distribution Ministry

Import during 2006-07 – Tender details

Wheat imported by & Wheat imported by & from......from......

IMPORT 2006IMPORT 2006 Inferior Quality of Imports Inferior Quality of Imports

• Speaking of the relaxation of norms for the first instalment of imports, a leader of the Congress farmers' front, complained:

– “We spent crores [tens of millions] fighting a single weed (parthenium, or congress grass) that came with Mexican wheat. And now we have got 12 weeds to oblige AWB.

• Source : Report of RUPE

WHEAT IMPORT TENDERWHEAT IMPORT TENDERRelaxation for Inferior Quality of Relaxation for Inferior Quality of

WheatWheat

• 17/2/2006 - Corrigendum-3 to the Tender No.STC/WHEAT/IMP/1/2006 dated 10.2.2006 for Purchase of Wheat.

• Note to Annexure-I - The words “confused flour beetle (Tribolium confusum)” stand deleted.

• (S. SARKAR)• GENERAL MANAGER

• Govt has made several relaxation for Wheat Import. The quality of wheat is inferior to Indian Wheat

Import @ Rs.15.97/kg in Sept. Import @ Rs.15.97/kg in Sept. 20072007

• 7.95 lac ton @ Rs.15.97/kg

• Import from Glencore, Toepfer & Starcom

• Govt. PSU – PEC (Project Engineering Corporation) offer of Rs.15 rejected.

Indian Kisan vs. American / Australian Indian Kisan vs. American / Australian FarmersFarmers

Minimum Support Prices (MSPs) of wheatMinimum Support Prices (MSPs) of wheat

# An additional incentive bonus of Rs. 50 per quintal was payable on Wheat over the Minimum Support Price (MSP)

## An additional incentive bonus of Rs.100 per quintal is payable on Wheat over the Minimum Support Price (MSP)

Simultaneously now Indian Govt. has paid Rs.15.97/k.g. to the Importers.

Source: Dept of Agriculture & Cooperation, Directorate of Economics & Statistics

Price paid to Indian Farmers(In Rupees per

quintal)

Prices in India – 2006Prices in India – 2006Wholesale & Retail Prices WheatWholesale & Retail Prices Wheat

Prices in India – 2007Prices in India – 2007Wholesale & Retail Prices WheatWholesale & Retail Prices Wheat

Source: Consumer Affairs Ministry

Import Price in Detail - 2006Import Price in Detail - 2006

Source: Business Standard, 13/9/06

Great Import ScamGreat Import Scam

• The UPA Government allowed MNCs and big Corporates to purchase directly. The fact and scenario of 2005-07 suggests something else. The delay in announcing MSP, bonus compelled the farmers to dispose of the stocks to MNCs/Corporates.

• MNCs Cargil Inc., Glencor, which purchased wheat in heavy quantity from Indian farmers, is going to supply wheat to Government of India now.

• Cargil purchased good quality of wheat from Indian farmers at the rate of Rs.8-8.50 per kg.

• Indian Government has placed import order with Cargil Inc. at the rate of Rs.15.97/ kg.

Great Import Scam (Contd.)Great Import Scam (Contd.)

• The horrible policy of the UPA Govt. allowing big private corporates, MNCs such Cargil, Glencor, Advani, Reliance, AWB to purchase direct and to develop unlimited stock.

• In response to Parliamentary Question No. 20 of 26.2.07 regarding complaints of purchases directly by big business houses, the Government stated that “Cargil, ITC, Glencor, Advani, Reliance, AWB, etc. have purchased 2 million tons of wheat in 2006-07”.

Procurement By Private Procurement By Private CompaniesCompanies

LOK SABHALOK SABHASTARRED QUESTION NO 546 ON 14.05.2007 STARRED QUESTION NO 546 ON 14.05.2007

• In spite of several complaints, Government of India announced “Govt. Is not interested to ban such MNC Corporates for direct Procurement Purchase

• No restriction of Pvt. RT

• No quantitative restriction has been imposed on private parties for procurement of wheat,

Procurement By Private Procurement By Private Companies Companies

Loksabha Loksabha Question No. 20 of 26-2-2007Question No. 20 of 26-2-2007

• As per feedback received from various agencies, wheat procurement by major private parties such as Cargill, ITC, Glencore, Adani, Reliance, AWB etc was only two million tones in Rabi Marketing Season (RMS) 2006-07.

Statewise Purchases Of Wheat Statewise Purchases Of Wheat Declared By MNC & CorporatesDeclared By MNC & Corporates

• Source : Ministry of Commerce, Food & Public Distribution

This statement has been prepared on the basis of the weekly returns filed by these companies

Information acquired under RTIInformation acquired under RTI

BJP demands explanation-BJP demands explanation-inquiry inquiry

• Investigation of how and why India converted into “wheat importing country”.

• Prices paid to Indian farmer, Rs.6.50 per kg (initially) in 2006 and Rs.7.50 per kg in 2007 and import at Rs.10 per kg in 2006 and Rs.13.61 per kg now (last purchase order)

• Logic of paying 'double price' to MNC/import in comparison to Indian farmer.

• Manipulative procurement of 2005, 2006 and 2007.

BJP demands explanation-BJP demands explanation-inquiry…inquiry…

• Reduction in procurement from 16.80 million tons to 9.22 million tons in 2006.

• Manipulative/faulty assessment/announcement by “The System” of production, procurement and import.

• Why the tenders of May 2007 were cancelled?

• Is it to benefit big corporate players of Commodity Exchange?

• Indian farmers' minimum support price Rs.7.50 and the import price Rs.13.17.

BJP demands explanation-BJP demands explanation-inquiry…inquiry…

• Enquiry of wrong and faulty assessment, announcement, procurement.

• Evaporation of such a huge buffer stock of wheat in the last 3 years.

• Bungling of the Central Government.

• Hike of $ 178 (February 2006) to $ 337 (July 2007) to MNC/Import.

• We want security of kisan and protection of consumer

Detailed study, observations in various study reports takes us to the conclusion

“It is the Business of Import” Commission Corruption “Import ka Dhandha”

DAL MEIN KALA

GEHU GHOTALAGEHU GHOTALA--Dr. Kirit

Somaiya

Sources :Sources :• Responses obtained under “Right to Information” from various

ministries– Agriculture

– Food & Public Distribution

– Consumer Affairs

• Chicago Commodity Exchange Wheat prices Table and chart

• Data wheat production, procurement, off-take etc.

• Replies to Parliament Questions Lok Sabha and Rajya Sabha

• Press clippings of various newspapers in connection with wheat import

• Reports of Research Unit for Political Economy Mumbai

• Report Of The Commission For Agricultural Costs And Prices on Price Policy for Rabi Crops of 2006-2007 Season, Department Of Agriculture And Cooperation Ministry Of Agriculture, Government Of India, New Delhi, July 2006